Cliff Nicholls runs two trampoline parks and indoor play centres: one in Tamworth in the West Midlands, the other in Bolton, Greater Manchester. He’s already feeling the pressure from the government’s latest budget measures and has been forced to abandon further investment plans.
“The national minimum wage increases coming in April, combined with the reduced thresholds for national insurance and the increased rate of employers’ national insurance, will have a very significant impact,” Cliff said.
To cut costs, he’s already made drastic changes. “We’ve had to take some fairly radical decisions, reducing our opening hours, making a senior staff member redundant because of rising business costs, including business rates and national insurance,” he added.
Image: Cliff Nicholls
While policies like the National Living Wage (NLW) increase are designed to support low-paid workers, other changes could offset these benefits.
One major shift is the reduction in the salary threshold at which businesses start paying employer’s national insurance contributions (NICs).
Currently, employers begin paying NICs when an employee earns more than £9,100 per year. From April 2025, this threshold will drop to £5,000. At the same time, the employer’s NI rate will rise from 13.8% to 15%.
Scroll through to see Cliff’s staffing finances
Under the new system, an employer will be paying nearly £800 more in NICs annually for an employee earning around £23,800 (based on a 37.5-hour week at the new NLW).
The rise in NICs will be proportionally higher for employers of lower-paid workers. For example, they will pay around 7% for someone earning £9,000 a year and 3% for an employee on the NLW. But for someone earning £75,000 a year, employers will pay 2% more.
Extended employment rights and business rates add pressure
Labour also announced a series of employment rights reforms aimed at improving working conditions. These include extending statutory sick pay to lower-paid employees who were previously ineligible and making it available from the first day of illness for all workers.
The changes would also enable employees to claim unpaid parental leave from their first day in a job, strengthen protections against unfair dismissal, and enhance rights for those on zero-hours contracts.
The government estimates that these employment rights changes will cost businesses around £5bn.
Nye Cominetti, principal economist at the Resolution Foundation, said: “What concerns me is that employer national insurance increases, like the minimum wage and employment rights changes, disproportionately impact low-paid workers.
“For instance, extending statutory sick pay to those previously ineligible adds costs for employers already facing higher NICs and rising wages. In this context, it would have been more sensible to raise tax revenue in a way that didn’t hit low-paid workers the hardest.”
Image: Cliff is having to abandon expansion plans due to budget changes
But for Cliff, the changes to business rates relief are an even bigger challenge. Budget changes will mean business rates relief will drop from 75% to 45% for retail, leisure, and hospitality businesses, significantly increasing his costs.
“The business rates changes probably have a bigger impact on us than national insurance,” he explained.
“One of our buildings used to be in a prime edge-of-town retail park 25 years ago. The rental value has dropped significantly since but business rates haven’t kept pace. Next year, we’ll be paying between £55,000 and £60,000 more just in business rates.”
Cliff is not alone in his concerns.
Research conducted by the Federation of Small Businesses found that in the final three months of last year, confidence among small firms fell to its lowest level in a decade, excluding the pandemic.
Are these changes impacting inflation?
Higher prices for food, goods, and services will also put pressure on working people.
New data from the Office for National Statistics shows that inflation rose to 3% in January 2025, the highest level in 10 months.
Many businesses had warned this would happen, saying that rising national insurance costs and the increase in the NLW would leave them with no choice but to raise prices.
The latest Quarterly Economic Survey by the British Chambers of Commerce, conducted after the budget, surveyed more than 4,800 businesses. It found that more than half expect to increase prices in the next three months, up from 39% in the third quarter of 2024.
Businesses are making tough decisions
Signs of pressure are already emerging.
Lord Wolfson, a Conservative peer and chief executive of Next, has warned that it will become harder for people to enter the workforce.
In an interview with the BBC, he said that the rise in NICs for businesses would hit the retail sector particularly hard, with entry-level jobs most affected.
He urged the government to phase in the tax changes rather than implement them in full in April, warning that otherwise, businesses would be forced to cut jobs or reduce working hours.
While it is not possible to fully attribute this to budget announcements, early data suggests that the workforce has been shrinking across various industries since October 2024, with the biggest declines in sectors that employ large numbers of lower-paid workers, such as manufacturing, retail, and hospitality.
Since the budget, the number of payrolled employees has fallen by more than 10,000 in manufacturing and nearly 9,000 in hospitality.
Since the budget, voluntary liquidations have remained consistently high and from December 2024 to January 2025 voluntary business closures have gone up by 9%.
While this can’t be solely attributed to upcoming budget measures, it does highlight the challenges businesses are facing and the difficult decisions they are making as a result.
An HM Treasury spokesperson said: “We delivered a once-in-a-parliament budget to wipe the slate clean and deliver the stability businesses need to invest and grow, while protecting working people’s payslips from higher taxes, ensuring more than half of employers either see a cut or no change in their National Insurance bills, and delivering a record pay boost for millions of workers.
“Now we are going further and faster to kickstart economic growth and raise living standards, with a majority of business leaders confident that the chancellor’s plans will help drive business investment.
“This includes backing businesses to create wealth across Britain by capping corporation tax, making full expensing permanent and permanently cutting business rates for retail, hospitality, and leisure businesses on the high street from next year.”
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The intense financial pressure facing Britain’s casual dining sector will be underlined this week when Gusto, the Italian restaurant chain, falls into administration.
Sky News has learnt that Interpath Advisory is preparing a pre-pack insolvency of Gusto, which trades from 13 sites.
Sources said that a vehicle set up by Cherry Equity Partners, the owner of Latin American restaurant concept Cabana, was the likely buyer.
It is expected to take over most of Gusto’s sites although some job losses are likely.
A deal could be announced in the coming days, according to insiders.
The collapse of Gusto, which is backed by private equity investor Palatine, follows a string of increasingly heated warnings from hospitality executives about the impact of tax rises on the sector.
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Kate Nicholls, who chairs UK Hospitality, said this month that the industry faced a jobs bloodbath amid growing financial pressure on operators.
This week, Sky News reported that the restaurant industry veteran David Page, a former boss of PizzaExpress, was raising £10m to take advantage of cut-price acquisition opportunities in casual dining.
Mr Page is planning to become executive chairman of London-listed Tasty, which owns Wildwood and dim t, and rename it Bow Street Group.
A placing of shares in the company is likely to be completed this week.
Interpath declined to comment on the Gusto process.
TPG, the American private equity giant, is in advanced talks to take a stake in Tide, the British-based digital banking services platform.
Sky News has learnt that TPG, which manages more than $250bn in assets, is discussing acquiring a significant shareholding in the company.
Sources said that Tide’s existing investors were expected to sell shares to TPG, while a separate deal would involve another existing shareholder in the company acquiring newly issued shares.
The two transactions may be conducted at different valuations, although both are likely to see the company valued at at least $1bn, the sources added.
The size of TPG’s prospective stake in Tide was unclear on Monday.
Earlier this year, Sky News reported that Tide had been negotiating the terms of an investment from Apis Partners, a prolific investor in the fintech sector, although it was unclear whether this would now proceed.
Tide has roughly 650,000 SME customers in both Britain and India, with the latter market expanding at a faster rate.
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Morgan Stanley, the Wall Street bank, has been advising Tide on its fundraising.
Tide was founded in 2015 by George Bevis and Errol Damelin, before launching two years later.
It describes itself as the leading business financial platform in the UK, offering business accounts and related banking services.
The company also provides its SME ‘members’ in the UK a set of connected administrative solutions from invoicing to accounting.
It now boasts a roughly 11% SME banking market share in Britain.
It is a trade deal that will “rebalance, but enable trade on both sides,” said Ursula von der Leyen after the EU and US struck a trade deal in Scotland.
It was not the most emphatic declaration by the president of the European Commission.
The trading partnership between two of the biggest markets in the world is in significantly worse shape than it was before Donald Trump was elected, but this deal is better than nothing.
As part of the agreement, European exports to the US will be hit with a 15% tariff. That’s better than the 30% the bloc was threatened with but it is a world away from the type of open and free trade European leaders would like. The EU had offered tariff free trade to the US just weeks before the deal was announced.
Instead, it has accepted a 15% tariff and agreed to ramp up its energy purchases from the US.
The EU tariff on US imports will remain close to zero but Europe did get some important exemptions – on aviation, critical raw materials, some chemicals and some medical equipment. That being said, the bloc did not achieve a breakthrough on steel, aluminium or copper, which are still facing a 50% tariff. It means the average tariff on EU exports to the US will now rise from 1.2 % last year to 17%.
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There is also confusion over the status of pharmaceuticals – an important industry to Europe. Products like Ozempic, which is made in Denmark, have flooded into the US market in recent years and Donald Trump was threatening tariffs as high as 50% on the sector.
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8:58
US and EU agree trade deal
It appears that pharmaceuticals will fall under the 15% bracket, even though President Trump contradicted official announcements by suggesting a deal had not yet been made on the industry. The risk is that the implementation of the deal could be beset with differences of interpretation, as has been the case with the Japan deal that Trump struck last week.
It also risks fracturing solidarity between EU states, all of which have different strategic industries that rely on the US to differing degrees. Germany’s BDI federation of industrial groups said: “Even a 15% tariff rate will have immense negative effects on export-oriented German industry.”
The VCI chemical trade association said rates were still “too high”. For German carmakers, including Mercedes and BMW, there was some reprieve from the crippling 27.5% tariff imposed by Trump. The industry is Europe’s top exporter to the US but the German trade body, the VDA, warned that a 15% rate would “cost the German automotive industry billions annually”.
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Who’s the winner in the US-EU trade deal?
Meanwhile, François Bayrou, the French Prime Minister, described the agreement as a “dark day” for the union, “when an alliance of free peoples, gathered to affirm their values and defend their interests, resolves to submission.”
While the deal has divided the bloc, the greater certainty it delivers is not to be snubbed at.
Markets bounced on the news, even though the deal will ultimately harm economic growth.
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1:40
‘Millions’ of EU jobs were in firing line
Analysts at Oxford Economics said: “We don’t plan material changes to our eurozone baseline forecast of 1.1% GDP growth this year and 0.8% in 2026 in response to the EU-US trade deal.
“While the effective tariff rate will end up at around 15%, a few percentage points higher than in our baseline, lower uncertainty and no EU retaliation are partial offsets.”
However, economists at Capital Economics said the economic outlook had now deteriorated, with growth in the bloc likely to drop by 0.2%. Germany and Ireland could be the hardest hit.
While the US appears to be the obvious winner in this negotiation, uncertainty still hangs over the US economy.
Trump has not achieved his goal of “90 deals in 90 days” and, in the end, American consumers could still bear the cost through higher prices.
That of course depends on how businesses share the burden of those higher costs, with the latest data suggesting that inflation is yet to rip through the US economy. While Europe determined on Sunday that a bad deal is better than no deal, some fear that the worst is yet to come for the Americans.